The ABC Tool Company Is Considering the Best Manufacturing Location

Essay

The ABC Tool company is considering the best manufacturing location decision for manufacturing their range of PowerDrills.The 3 options are to manufacture in the USA (current scenario),outsource manufacturing to either China or India.The cost to manufacture the product in the USA location (including all overhead costs)is $50 per unit,whereas the same cost for the China and India locations are $33 per unit and $30 per unit respectively.A container can hold 1000 units and it costs $10,000 to ship a container from China to USA and $11,200 to ship a container from India to USA.Additional inventory carrying costs incurred on account of the China and India locations are $1 and $1.35 per unit respectively.Additional logistics costs (on account of customs duties and related delays)are $2 and $2.5 for the China and India locations respectively.Determine the best (lowest cost)location to manufacture the PowerDrill product line.